Silver Lake Said to Mull Change at Middle-Market Division

Silver Lake Management LLC, the biggest technology-focused private-equity firm, has left investors wondering about the future role of its middle-market unit’s founder as the division prepares to raise a new fund next year, four people familiar with the matter said.

The firm told investors that Ajay Shah may take a reduced role, said the people, who asked not to be named because the information isn’t public. Silver Lake hasn’t determined how Shah’s responsibilities may change, the people said.

Shah, a managing director, joined Silver Lake in 2007 from Shah Capital Partners, which he founded in 2004, to start the firm’s middle-market strategy, known as Silver Lake Sumeru. The division makes private-equity investments in growth-oriented technology companies.

Investors in private-equity funds, called limited partners, generally prefer clarity around the management team and its incentive structure before choosing to back a new fund as their money is typically locked up for ten years. The management structure for the new fund is under discussion, the people said. Other managing directors on the mid-market team are John Brennan, Hollie Moore Haynes, Paul Mercadante and Kyle Ryland.

Gemma Hart, a spokeswoman at Brunswick Group, declined to comment on behalf of Menlo Park, California-based Silver Lake. Shah did not return a call and an e-mail seeking comment on his role.

The firm had originally planned to market the fund this year, the people said.

Sumeru Fund

Silver Lake raised $1.1 billion for its first middle-market vehicle, Silver Lake Sumeru Fund LP, in 2008. That fund was producing a multiple of 1.3 times invested capital and a 7.9 percent net internal rate of return as of March 31, according to performance data from California Public Employees’ Retirement System.

Silver Lake Sumeru has since sold Power-One Inc., a Camarillo, California-based maker of solar inverters, to Zurich-based ABB Ltd. and Chandler, Arizona-based Smart Storage Systems to SanDisk Corp., the Milpitas, California-based maker of flash memory for mobile devices. The sale of Power-One produced 5.6 times invested capital before fees, and Smart Storage generated a multiple of 5 on the same basis.

Silver Lake, which was founded in 1999 and manages more than $20 billion in assets and committed capital, raised $10.3 billion for its latest flagship fund in April. The firm partnered with Michael Dell to buy computer maker Dell Inc.

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